Why India pays highway builders even when roads stay empty

India's Hybrid Annuity Model (HAM) is a financing method for highway construction that has its roots in a response to failed projects under the earlier Build-Operate-Transfer (BOT) model. Under HAM, the government funds 40% of project costs directly during construction, and the remaining 60% is raised by private developers through debt and equity.

The toll fee collection from these highways is the responsibility of the government, not the developer. This model shifts the risk of traffic forecast and revenue leakage to the government, while keeping the developer focused on building and maintaining the infrastructure. HAM has been credited with helping to complete 88% of the projects awarded between 2016 and 2023, despite some delays in newer projects due to factors such as land acquisition issues and lenders tightening capital requirements.